Minimum Support Price MSP

In order to ensure agricultural producers are protected against any sharp fall in farm prices, Govt intervenes in the agricultural market

MSP is a Govt market intervention scheme
MSP is not a legal right as of now (Right to sell at MSP)

According to the Agricultural Produce Marketing Committee Act, 2006, it is a duty of the Agricultural Produce Marketing Committee to prevent the sale of produce at below the MSP. FCI has also obligation to procure at MSP
Govt announces to certain crops prior to sowing season
Its purpose is to incentivize cultivators to adopt modern technology and raise productivity and overall production in line with the emerging demand patterns in the country
Prices are decided by CCEA on the basis of recommendations of the Commission for Agricultural Costs & Prices (CACP)

NOTE: Prices decided by Cabinet Committee on Economic Affairs. CACP does not decide but only recommends

MSP announced for

23 commodities
Cereals -7 - paddy, wheat, maize, sorghum (jonna), pearl millet, barley and ragi
Pulses - 5 -gram, tur, moong, urad, lentil
Oilseeds -7 -groundnut, rapeseed-mustard, soyabean, sesamum, sunflower, safflower, nigerseed
Commercial crops -4- Cotton, Jute, Sugarcane, Copra (coconut)
Note: No fruits and vegetables

However, procurement by Central and State Agencies is limited to rice and wheat and some amount of coarse cereals. Ministry of Textile for cotton and jute
Government also procures limited quantity of oil seed and pulses through NAFED, SFAC and some other agencies

Price Deficiency Payment PDP

Under Price Deficiency Payment, farmers are proposed to be compensated for the difference between the government-announced MSPs for select crops and their actual market prices

Pradhan Mantri Annadata Aay SanraksHan Abhiyan’(PM-AASHA)

Under Ministry of Agriculture and Farmers Welfare
It is an umbrella scheme for ensuring remunerative prices to farmers and comprised of

Price Support Scheme (PSS),
Price Deficiency Payment Scheme (PDPS)
Pilot of Private Procurement & Stockist Scheme (PPPS)

Price Support Scheme (PSS)

Physical procurement of pulses, oilseeds and Copra will be done by Central Nodal Agencies with proactive role of State governments
Besides, NAFED, FCI also takes procurement operations in states/districts
The procurement expenditure and losses due to procurement will be borne by Central Government as per norms.

Price Deficiency Payment Scheme PDPS

Covers all oilseeds for which MSP is notified.
Centre will pay the difference between the MSP and actual selling/ model price to the pre-registered farmer directly into his bank account after transparent auction process of the produce in the notified market.
This scheme does not involve any physical procurement of crops

Private Procurement & Stockis Scheme (PPSS)

For MSP oilseeds, states have the option to roll out Private Procurement Stockist Scheme (PPSS) on pilot basis in selected district/APMC(s) of district involving the participation of private stockiest
It will cover one or more crop of oilseeds for which MSP is notified
The selected private agency shall procure the commodity at MSP in the notified markets during the notified period from the registered farmers whenever the prices in the market fall below the notified MSP and whenever authorized by the state/UT government to enter the market
It shall substitute PSS in the pilot districts.

Note: PSS involves procurement by public agencies while PDPS involves procurement by private agencies

Difference is compensated through a service charge up to a maximum of 15% of the MSP of the crop

NOTE: PM-AASHA scheme does not include cereals

Commission for Agricultural Costs & Prices (CACP)

Statutory body Under Ministry of Agriculture and Family Welfare
Minimum support prices are announced by the Government of India at the beginning of the sowing season for certain crops on the basis of the recommendations (Price Policy Reports) of the Commission for Agricultural Costs and Prices (CACP)
Cabinet Committee on Economic Affairs decides the MSP on the recommendations of CACP
Composition

Currently, CACP comprises Chairman, Member Secretary, one Member (Official) and two Members (Non-Official).
The non-official members are representatives from farming community

While recommending MSP of various commodities, the Commission analyzes

demand and supply
cost of production
price trends in the market, both domestic and international
inter-crop price parity
terms of trade between agriculture and non-agriculture; and
likely implications of MSP on consumers of that product.

Pricing based on three different methods, termed as A2, A2+FL, and C2.

A2 covers all paid out expenses, including in cash and in kind, namely, cost on account of seeds, chemicals, hired labour, irrigation, fertilizers and fuel.
A2+FL covers actual paid cost and unpaid family labour.
C2 includes all actual expenses in cash and kind incurred in production and rent paid for leased land, imputed value of family labour plus interest paid.

Govt has been giving MSP above 50% based on cost A2+FL (MSP should be at least 1.5 times the all Indi weighted average cost of production) while farmers have been demanding that the raise in MSP based on C2 instead.

Farmers (Empowerment and Protection) Agreement on Price Assurance and Farm Services Act, 2020

Objective: To enable contract farming
Farming agreements

Can be made before production b/w farmers and sponsors
Agreement may provide for mutually agreed terms and conditions for supply, quality, standards and price of farming produce as well as terms related to supply of farm services.
Agreement may be linked to insurance services
Agreement must mention prices to be paid for farming purchase

Sale, lease or mortgage of farmers’ land is totally prohibited and farmers’ and is also protected against any recovery.
State government may establish a registration authority for registering farming agreements
Farming agreements will be exempt from stock limits and state acts regulating sale and purchase of farming produce.
Dispute settlement: first conciliation, then settlement and appeal

Pricing